Tag: auto lending

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Uncategorized

When Not to Turn the Other Cheek

Credit unions continued to demonstrate resilience in navigating some of the challenges of the last quarter: income declined from the third quarter; provisions and actual charge-offs rose, but auto lending still weakened. Providing a snapshot of the overall industry, the nation’s Top 10 credit unions in the U.S. suffered a drop in ROA and higher-than-expected credit losses. While the Top 10 bolstered their provisions for the quarter, and charge-offs were smaller, delinquency rates rose, reflecting some potential cracks in the overall health of the economy.

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Uncategorized

More Opportunities in 2025

Last month, I had a conversation with a credit union client where she expressed relief that 2024 was finally coming to an end. Truly, it’s been a tumultuous year for many financial sectors. While NCUA Q2 Quarterly Data Summary showed an increase in total assets, loans outstanding climbed and delinquency rates were up 21 basis points from 2023. Specific to auto loans, new files declined 4.3 percent and delinquency rates of existing loans increased 16 basis points. Experian put a finer point on the situation in their State of the Automotive Finance Market report stating that credit unions lost their lead in used car lending in the first quarter to banks, and credit unions’ share of new car financing also dwindled, falling further behind banks and captive lenders.

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Business Growth

Hedging a Seven-Year Auto Lending Bet

According to credit bureau Experian, 19 percent of new-vehicle debt and 11 percent of used-vehicle loan terms were 84 months in 3Q 2022. By comparison, Experian data revealed that only 11 percent of new-vehicle borrowers and 4.1 percent of used-vehicle borrowers in 3Q 2018 were on the hook for an 84-month auto loan. That’s seven years of debt on a vehicle that begins to depreciate the minute it’s driven off the lot. Outside of lending terms, how is your credit union hedging its bets in the automotive lending space?

Rising vehicle costs, rising inflationary interest rates and continued concerns about the economy have prompted buyers toward lower monthly payments and longer-term loans. Lenders are also willing to offer pre-approved rates at upwards of 96-months on the strength of interest-derived revenue and low delinquency rates. But, how long can that last?

The state of auto lending is not a one-dimensional picture. Let’s look at some details to get a better view of the rewards – and risks – of long-term auto loans.

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